Analysts at Jefferies said it would likely take a major loss event of more than $100 billion to significantly change reinsurance market conditions, following a 15-20% drop in real estate catastrophe pricing at renewal time in June.
Early forecasts suggest this year’s hurricane season will be below average as El Niño reduces storm activity and reduces the chance of landfall, according to a new report from the company.
Jeffries continued, “Conditions during the North Atlantic storm season indicate below-normal activity – with sea surface temperatures near average in the western Atlantic but below normal in the eastern/central tropical Atlantic, where storms typically form.
“Weak La Niña conditions currently exist, but are expected to transition to El Niño (moderate/strong levels) soon. El Niño conditions are generally less conducive to storm formation/activity.”
This combination reportedly led meteorologists at Colorado State University to predict a below-average hurricane season, with a 24% chance of a major hurricane making landfall in the United States (versus a 43% 20th-century average) and a 26% chance of a major hurricane entering the Caribbean (versus a 47% 20th-century average).
Jefferies noted that these 2026 forecasts are broadly consistent with average forecasts from 2012-16.
“We note that since 2014, Colorado State University meteorologists have experienced a correlation, or accuracy, of about 45% when comparing the estimated activity of preliminary forecasts of Atlantic hurricane formation to actual observed activity (since 2020, the accuracy has jumped to about 55%). Colorado State University’s forecasts for June were lower than those for April,” the company’s report added.
Jefferies observed that the 2026 hurricane season comes just a few years after Hurricane Ian caused industry losses of more than $50 billion, boosting the hard reinsurance market in 2023 before slowing down in the subsequent three years.
Huge losses from hurricanes this year could lead to a renewed firming of prices, according to the report, but Jefferies doesn’t expect broad market strength, citing airlines’ strong retained earnings growth in recent years, new growth directions for ILS funds and Florida market reforms that are spurring new interest in the state.
With this in mind, the company highlighted a $100 billion-plus campaign, particularly one centered in Florida, as the threshold needed to fundamentally change the reinsurance and CAT bond markets.
Jefferies continued, “If large losses do occur and push pricing higher, brokers may see some pickup in organic levels in outside years as interest rate-driven exposure increases. A benign season with few losses could benefit primary insurer trades rather than reinsurer trades outperforming so far this year.”
“If hurricane activity and insured losses are lower throughout the season, Bermuda reinsurers may exit the year with a continued excess of capital, potentially further accelerating buybacks starting in 4Q26.”
